AZUSA - With its redevelopment agency falling victim to the state's budget ax, the city's plans to build affordable housing on the site of a neighborhood once troubled by gang violence and drugs have come to a grinding halt.

Through its redevelopment agency, Azusa had been buying up the quadplex apartment buildings in Atlantis Gardens, a cluster of about 40 buildings near Rockvale and Alosta avenues.

The ultimate goal was to purchase all of the buildings, raze them, and rebuild an improved community featuring about 200 units of low-income and veteran housing in their place.

Azusa Mayor Joe Rocha said the idea was that by building a new complex with a single owner and manager, it would be easier to keep the neighborhood clean and safe.

"Those units there had multiple owners," Rocha said. "They started to become unkempt. It really fell into deterioration."

The city's redevelopment agency has so far purchased 18 of the 40 buildings. But with its agency now dead, Azusa will be unable to purchase the remainder.

What remains is a gap-toothed neighborhood - apartment buildings interspersed with vacant dirt lots representing the units already purchased and demolished by the city.

And no one is really sure how to proceed.

"That project is pretty much dissolved as of right now," said Councilman Robert Gonzales. "We don't know when we're going to be able to finish."

Kurt Christiansen, Azusa's economic and community development director, said city officials aren't even sure who will end up owning the properties by the time everything shakes out.

The city could opt to become the successor agency for the housing portion of its redevelopment agency, but Christiansen said that would leave it with an unfunded housing program.

If the city washes its hands of the program, Christiansen said the properties could end up as the responsibility of the county housing authority.

"I've heard rumors out there that the county is not willing to take over those," Christiansen said. "Then it would fall into the state's lap."

Even if the city hangs on to the properties, it no longer has a developer for them. Amid the uncertainty that developed between the time the legislature voted to dissolve redevelopment agencies and when the California Supreme Court affirmed the legality of the move last month, the city severed its agreement with Mercy Housing, the nonprofit organization that was to develop the site.

Christiansen said Mercy had already spent about $140,000 on the now-dead project. In killing its agreement with Mercy, the city will be obligated to pay back $50,000 of that.

"They were a great partner," Christiansen said. "It's sad that this all happened."

Ed Holder, vice president of real estate development for Mercy California, said the elimination of redevelopment agencies has complicated its efforts to build affordable housing in Azusa and across the state.

"We are certainly interested observers, but there's not much we can do until that (successor agency) is determined," he said. "Whoever the successor housing agency is, we'd love to work with that agency. Certainly, we think we have a lot to bring to the city as well."

Rocha said the neighborhood is now a lot calmer since the city tore down half of its buildings, but he said it's still "not a pretty site."

"What do we do in the meantime?" he asked. "It was blighted before. Now it's bad because it's parcels of dirt and rock."

Rocha has an idea, but it will depend on what the city's next budget looks like.